Car salesman confidential: don't parachute your trade-In

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One of the most widely accepted bits of advice you’ll find presented in practically every consumer magazine as Wisdom From Upon High is a bad idea.

The advice is this: First, negotiate your best price on the car you’re thinking of buying. Then, and only then, should you tell your salesperson you’re planning to trade, and ask for an appraisal of your car. The thinking behind this seems to be that if you tell the salesperson up front that you’re trading in your car, he will somehow be able to use one of his Jedi mind tricks and talk you into paying too much for his car and accepting too little for your trade. Gosh, I wish I knew one of those mind tricks! I’d be rich.

There are two problems with this advice: One, it doesn’t work. and two, it requires you, the customer, to lie.

Now the reason customers hate car salespeople is that we lie, right? And we like to “play games.” So what do all the experts tell you to do when dealing with car salespeople? Lie and play games.

They even tell you how to lie, giving you the exact phraseology. “If asked whether you’re trading in your vehicle by the salesman,” the magazines say, “tell him you haven’t decided yet.”

Of course, you already have decided. You know you’re planning to trade. But revealing this information too early in the process will hurt you, according to the experts. So you lie.

Well, guess what? I know you’re planning to trade, too. Every salesperson on the planet knows what the words “I haven’t decided yet” mean. They mean you’re planning to negotiate your best price first and then drop the trade-in on us later. We’re not stupid. And we read the same books and magazines you do.

In fact, this is such a well-known customer tactic that there’s even a phrase for it in the car business. It’s called “parachuting the trade.”

But here’s the truth. You might call this one of Mark’s Maxims.

Mark’s Maxim No. 1: Tell the Salesman About the Trade

The only thing “parachuting the trade,” or holding back the fact that you’re trading, does is increase the amount of time it will take you to make a car deal. And one of the biggest complaints consumers have about buying a new car is how long it takes. So why prolong it?

Second, parachuting will cause your salesperson to distrust you, because you’ve shown a willingness to lie. With human nature being what it is — and yes, salespeople are human beings, too — knowing that they’ve been lied to makes it easier for any salesperson to rationalize lying to you.

And third, it actually hurts you in the long run, because it eliminates your bargaining power when it comes to the trade-in. The fact is, this tactic adds absolutely nothing to the value of your trade. The actual cash value of your trade-in is what it is, whether you introduce it at the end of the process or at the beginning.

Now, you’re probably wondering, how can it hurt me? Easy. Think of a car deal as a pie. There’s only so much profit available in every car deal. You can think of the total available profit as the size of the pie. Now, you can slice that pie up a zillion ways. As a customer, you can take half of it, or two thirds of it, or only a tiny slice. But if you take all of that pie right up front when negotiating the purchase price, that means there’s less pie left over when it comes time to talk about your trade. That means you’re likely to get less for your trade-in, not more, because the dealership will be trying to get back some of the profit they’ve already given up.

The best way to handle a trade-in is to tell your salesman up front that you would like to trade your current car in, but don’t have to. It all depends on what you get for it. Your main concern is, and should always be, the overall deal: the payments, the interest rate, etc., not just the trade-in value. Never focus solely on only one aspect of the deal, but take everything into account. Hey, that sounds like another maxim!

Mark’s Maxim No. 2: Always Focus on the Overall Deal — Don’t Get Hung up on Only One Aspect

If you take the honest, direct approach, most salespeople will appreciate it and work even harder for you, which is what you want. And if you can get the salesperson working for you instead of against you, you have a better chance of getting the best deal possible on the car you want.

Yes, Mark McDonald is an honest-to-goodness (and honest) veteran car salesman who will be periodically blogging on the ins and outs of the car buying process from his unique perspective. While Mark’s views do not necessarily reflect the opinions of Motor Trend, he has some interesting insights. Let us know if you agree.